The PSoC 4 architecture provides the MCU + PLD + Analog Fabric at a fraction of historical pricing. The product family was designed from day one to take on the 8/16 bit replacement market and to bridge to 32 bit ARM. The integration allows you to do some really impressive solutions like FOC based motor control, but at a much more reasonable price point. I think you will find our first PSoC 4 products can easily handle this market and be quite price competitive... More to come very soon. Thanks for your interest and question.

So Cypress had old 8-bit PSOC3 and new 32-bit ARM PSOC5. Seems confusing that they created PSOC4 for low-end ARM. What is the fundamental difference between 5 and 4? I suspect it's a marketing 'wolf whistle' saying 'the prices are lower'.

The PSoC 5LP family announced in December of 2012, did launch with improved pricing over previous generation PSoC 5 products. PSoC 3 has an 8-bit core (8051 based), but it is closer in system performance to a PSoC 5LP product with the same analog and digital performance in many cases. The PSoC 4 architecture delivers better core performance as expected from a Cortex-M0 over an 8051 and the chip architecture is significantly different from previous product generations. The first members of the PSoC 4 family will be well suited to reducing system cost through programmable hardware integration, while maintaining the ease-of-use that is expected for 8/16 bit applications.

I forgot about 5LP... so it's four product lines...
If as you say PSOC 3 has similar performance as 5LP with similar analog capabiliites, and PSOC4 is better, it seems to me that you're implying Cypress is phasing out PSOC3?